What is Break-even point
The break-even point is the point at which total cost and total revenue are equal, meaning there is no loss or gain for your small business. In other words, you've reached the level of production at which the costs of production equal the revenues for a product. For any new business, this is an important calculation in your business plan. Potential investors in a business not only want to know the return to expect on their investments but also the point when they will realize this return. This is because some companies may take years before turning a profit, often losing money in the first few months or years before breaking even. For this reason, the break-even point is an important part of any business plan presented to a potential investor. For existing businesses, this can be a useful tool not only in analyzing costs and evaluating profits they’ll earn at different sales volumes but also to prove their potential turnaround after disaster scenarios. How to Calculate: ·